Andrea Mullane: Air New Zealand board misses marketing expertise

OPINION:

As incoming chief executive Greg Foran stepped up to the plate in February 2020, the global aviation industry ground to a virtual standstill due to the coronavirus pandemic.

Emergency measures were needed to mitigate colossal losses and over 4000 staff were made redundant. Among them were senior marketing professionals previously included in the executive team.

Like other companies, Air New Zealand is essentially a marketing company; creating income through sales of its products and services. In a broad context, marketing is as strategic and tactical as it is creative and results-driven.

Externally orientated, marketing focuses on current and prospective customers, suppliers and competitors, which all exist outside the business. The important role of professional senior marketers is to create and deliver competitive strategy. They are advocates of the brand; the drivers of the company’s ability to win against competitors; to win against the best in the world.

In the fiercely competitive aviation market, Air New Zealand stands on its unique brand; a multi-layered identity which differentiates against larger competitors and is difficult to copy.

This brand is inexorably linked to our country, our people and our culture. It forms a valuable asset and belongs to the company’s intellectual property. This is Air New Zealand’s competitive advantage.

Prior chief executives Rob Fyfe and Chris Luxton focused heavily on developing this brand, “…as the living embodiment of the Kiwi psyche: inspirational and innovative, the small guys in very large world”, Fyfe said in an interview for New Zealand Management magazine back in August 2006.

He pointed out that globally Air New Zealand ranked 35th in size between Alaska Airlines and South Africa Airlines. Despite this, Air New Zealand has built and maintained international renown because of a brand which reflects the style and humour of New Zealanders while boldly differentiating itself.

Brand delivers the biggest pay-off and allows Air New Zealand to stand out in a saturated industry. Within service-orientated businesses like Air New Zealand, the brand – our warm and unique Kiwi-ness – is primarily delivered by its Kiwi staff and crew. Their personal one-to-one interactions express the brand and impact all points of the customer experience.

In November 2019 Airline Ratings named Air New Zealand Best Airline for 2020. To achieve this ranking for a sixth time, Air New Zealand had led in most of the 12 key criteria areas.

“An outstanding performance when it’s up against carriers with more resources and scale”, said Geoffrey Thomas, editor in chief, Airline Ratings. “Air New Zealand’s commitment to excellence in all facets of its business … through to a workforce that is delivering consistently to the airline’s (competitive market) strategy and customer promise (brand).”

However a recent article concerned me greatly; More than 1000 Air New Zealand staff petition management to save New Zealand jobs and stop outsourcing! My first issue regards the proposed “outsourcing of cabin crew to Shanghai based Chinese nationals”.

I think this is entirely inappropriate when there are experienced former staff needing these jobs and in my opinion, this outsourcing will undermine and weaken the brand. Re-hiring our own skilled staff must be prioritised over the lure of cheap labour.

The second issue of concern is Foran’s recent comment about the ” …sentiment around outsourcing; that everything should be based in New Zealand…” It appears that Foran has confused sentimentality with our understanding of Air New Zealand’s fundamental link to New Zealand.

We may have a deeper appreciation about the basis of his brand than he does.

Further, when Foran discussed the five objectives of their new strategy the first being; “People will be our competitive advantage”. This is highly problematic as it is the brand which the company can control, not individuals. If a person or even say 4000 people were to leave then logic follows that the company loses its competitive advantage.

This simply does not make sense and it is highly disturbing to me that their executive team failed to get to grips with this most fundamental marketing issue.

The Redundancy Broom has swept marketing expertise out of the executive team with a loss of organisational knowledge.

Lead by Foran, the Air New Zealand website details that top management now includes a chief customer and sales officer, responsible for “overseeing the sales, brand, marketing, customer and cargo functions”. Apart from the cargo business, this role is responsible for all their corporate marketing.

Unfortunately the role is now held by someone with a degree in economics and finance, who appears both under-experienced and unqualified for leading the company’s crucial marketing. This may explain why “top managers” were unable to identify their competitive advantage.

This is unacceptable for Air New Zealand. There is simply too much at stake. Perhaps this person would be better deployed elsewhere and the former executive reinstated or a suitably experienced and qualified new person recruited into the chief marketing role.

This is a matter of urgency.

In terms of organisation design, this senior executive position needs to be a chief marketing role; leading and managing the broad scope of the entire marketing operation.

This includes the development and execution of market strategy, maintaining competitive advantage and extends to co-ordinating the tactical marketing plans as well as customer and sales initiatives. At the senior executive level we see roles of chief finance not chief accounting, chief engineer not chief mechanic. Customer and sales is too narrow a focus at this level.

In addition, the board of directors is now led and dominated by three chartered accountants and a former chief finance officer. This would be appropriate if the organisation was a finance company or bank, which it is not.

Previously, the Air New Zealand board has included one or two experienced marketers.
This is entirely appropriate for an organisation competing in a fiercely competitive global market.

It appears that the Chair and CEO may both have fallen into the “more like me” trap; hiring people who are similarly skewed to finance, replicating their own perspectives. Foran has removed those who contribute a broader range of complementary skills and valuable alternate views which lead to improved decision making.

Much research in New Zealand and overseas has long established the importance of this especially: Crocombe, G.T., Enright, M.T., Porter, M.E. (1991) Upgrading New Zealand’s Competitive Advantage (First ed.) Auckland, New Zealand Oxford University Press (in association with New Zealand Trade Development Board).

Unfortunately finance-based executives in many organisations do not appreciate the pivotal role of strategic and tactical marketing (apart from winning international awards) and the importance of highly trained people in customer-facing roles.

While accountants and finance staff have expertise in money management, it is marketing expertise that drives income, competitiveness and profitability. Too many internally focused financiers and not enough externally focused marketers could compromise Air New Zealand’s survival.

If their brand is hollowed out by the dreaded short-term financial focus, or weakened by a lack of competent marketing expertise, it could be reduced to competing as a cost-based discount airline which can be, and must be, avoided.

The International Air Transport Association (IATA) estimates that it will take until 2024 to recover to the pre-Covid levels of air travel.

Air New Zealand needs to restore marketing expertise to the C-suite and to the board; seasoned executives who can provide strategic leadership to the airline’s recovery.

My genuine concern is that the accountants now running Air New Zealand will compromise the winning brand while preoccupied with their fiscal belly-buttons.

– Andrea Mullane is managing director at MOXY Marketing.

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